The biggest source of waste in Canadian health care? The private, for-profit sector

Brian Day’s legal battle against universal public health care in Canada is now before the BC Supreme Court. Day—along with other would-be profit-makers—are hawking unprecedented privatization as the solution to challenges in Canada’s health care system.

But two crucial facts are often missed in debates about public vs. private health care. First, Canada already leaves more of our health care to the private sector than most industrialized countries. And second, the private, for-profit sector is the single biggest source of waste and inefficiency in Canadian health care.

The private health sector in Canada has grown to nearly a third (29%) of total health expenditures, largely in the form of out-of-pocket payments and private extended health insurance (for those who have it). That’s because important health services like prescription drugs, mental health supports, dental care, optometry, physiotherapy, and home and community care largely fall outside the scope of public coverage – much more so than in Europe.

In turn, the other 71% of Canada’s health expenditures are financed under the public system – a proportion that trails the vast majority of countries in Europe according to OECD data. In countries such as Germany, France, Denmark, Sweden, and the United Kingdom, privately financed health care represents a significantly smaller share than in Canada – between about 15% to 21% of health expenditures. In other words, the scope of public health care coverage in Canada is too small, not too large.

The result of our high levels of private health expenditure is billions of wasted dollars annually.

One of the most glaring examples is our lack of a national prescription drug plan. Health policy experts estimate that a national pharmacare program would actually reduce the total cost of prescription drugs in Canada by $7.3 billion each year.1 That’s even after an assumed increase in total pharmaceutical usage, as a result of medicines being made available to those who need them, regardless of ability to pay.

The lack of public prescription drug coverage in our health care system makes Canada an international outlier, and erodes access to critical medications – particularly for Canadians who aren’t covered by extended health insurance through their jobs. Millions of Canadians have to pay for prescription drugs out-of-pocket. And the evidence suggests one in ten Canadians are not filling prescriptions because of costs, including more than 26% of those without extended health insurance.

To add insult to injury, Canada’s largely privatized pharmaceutical arrangements are much more expensive than what universal public drug coverage would cost. UBC Professor Steve Morgan estimates that, under current arrangements, Canada will waste approximately $100 billion over the next decade, compared to if we launched a national pharmacare program. These wasted resources could be used instead to reduce surgical waitlists and make other needed improvements in our public health care system.

Another major source of waste in Canadian health care is the bloated administrative costs of the private sector (such as the duplication of claims processing systems across multiple private insurance companies). The Canadian Institute for Health Information finds that the total share of private health expenditures going to administration is more than triple the share in our public health system. Moreover, private sector administrative costs have rose continuously over the past four decades, even as they fell in the public health system.

Academic studies have found that administrative costs in the United States’ highly privatized health care system are about double those in the Canadian health care system – part of the reason the US spends much more on health care as a share of its total economic pie (GDP) than we do in Canada.

Furthermore, for-profit extended health insurance in Canada is among the most inefficient in the world. Health policy researcher Michael Law found that Canadians pay $6.8 billion more in private health insurance premiums than they receive in payouts from claims in a given year. That means for every dollar paid, Canadians only receive $0.74 in benefits. Private insurers are in the business of making money after all.

We also know that the lack of public coverage for mental health services—unlike in countries such as the United Kingdom—is enormously costly to people’s lives and to our economy. The cost of mental illness in Canada is estimated to be at least $50 billion annually. Yet, for example, a massive national program to make psychotherapy more widely available would cost on the order of a few hundred million dollars, according to a recent estimate modelled after a widely hailed initiative in the UK.

Boldly expanding the scope of public mental health coverage in Canada would deliver enormous savings and, more importantly, a crucial social good.

Another major inefficiency arises from low public investment in home and community care for seniors and people with disabilities – support services like help with cooking and bathing, home nursing, long-term residential care, and end-of-life palliative care. Without access to these kinds of services, seniors are more likely to end up in crisis, which requires expensive emergency room care and inpatient hospital beds.

These pressures lead to overcrowded hospitals and longer wait times for surgeries, whereas expanding public home and community care would improve seniors’ quality of life, help to contain costs and improve wait times in the system overall.

Unfortunately, in BC we’re experiencing the worst of both worlds: substantial reductions in access to home and community care, as well as an increase in for-profit seniors’ residential care. And research shows that for-profit facilities provide seniors with a lower standard of care.

There are a number of public sector solutions to surgical wait times, outlined in a recent CCPA study. These include moving to a “first available surgeon” model where waitlists are pooled for different surgery types; properly staffing operating rooms so that they function at full capacity; and adopting best practices in surgical procedures and patient care province-wide (currently, they’re often used only in isolated areas where pilot projects have been run). Diverting public dollars to private clinics is not the solution: the international evidence shows that private clinics fail to improve wait times while they increase costs and reduce quality of care.

Nonetheless, Brian Day and others continue to press for a massive expansion of private surgical clinics, and privatization writ large in our health care system. Oddly enough, Day even tries to use European systems as a justification for pushing for more privatization in Canada.

But, as we’ve seen, if there’s a health care lesson from Europe, it’s that we can and should have a much broader scope of public health coverage in Canada. Evidence shows that we can have a more just, equitable and comprehensive universal health care system that costs less and provides higher quality care for all. This can’t happen, however, if the misinformed privatization agenda wins the day.

Notes

  1. That would include an $8.2 billion reduction in private spending on pharmaceuticals, and a modest $1 billion per year in government spending, which could be financed out of a small portion of those private savings.

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